Community Financial System, Inc. · NYSE:CBU
Community Financial System — Q3 2024 Earnings Presentation
65 slides from Community Financial System's earnings presentation, Oct 22, 2024
Slide 1: Investor Presentation
FINANCIAL SYSTEM, INC. - Investor Presentation COMMUNITY FINANCIAL SYSTEM, INC. | NYSE: CBU NOVEMBER 2024
Slide 2: Disclaimers
Disclaimers Forward-Looking Statements This presentation contains comments or Infor mation that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995), which involve significant risks and uncertainties. Forward-looking statements often use
Slide 3: About CBU
About CBU SUCCESSFUL AND GROWING FINANCIAL SERVICES COMPANY operating four scaled, complementary business lines Employee Benefit Insurance Wealth Management Bankin 2 H 5 3 Services Services Services 666 | Community ; 7 Community BPAS ONEGROUP SRT EANE Operating Revenue Mix * Large bank capabilities
Slide 4: Our Evolution Into a Diversified Financial Company
Our Evolution Into a Diversified Financial Company • • • • •
Slide 5: Focus on Revenue Quality, Diversification and Sustainable Results
Focus on Revenue Quality, Diversification and Sustainable Results • •
Slide 6: Our Investment Thesis
Our Investment Thesis: • • • • • •
Slide 7: Below Average Risk
Below Average Risk Revenue Growth Stability 5 20% 3 15% S 10% 5 3% g 0% (5%) Banking Industry! 2018 2019 2020 2021 2022 2023 YTD 2024 Cost of Funds Net Charge-off Ratio 3.00% 2.45% 2.41% 0.20% 018% 0.18% 013% 2.00% 1.37% 1.30% 0.10% 0.09% 0.09% ons _ = . nil 0.24% 0.00% i 0.00% YTD 2024 TT™M 10-Yr A
Slide 8: Above Average Returns
Above Average Returns Core Return on Assets! Core Return on Equity’ 1.50% , 7 139% 15.00% 119% 4 999 118% 4 O70 114% 9.6% 10.2% 97 1.00% 10.00% ° 080% _ i 0.00% 0.00% YTD 2024 10-Yr Avg YTD 2024 10-Yr Avg mCBU mKRX (median) mCBU mKRX (median) Total Shareholder Return? 30% 24.5% _ 26.9% 20.7% ° 18.9%
Slide 9: Our System Produces Premium Results
Our System Produces Premium Results 10Yr Avg. Relative Premium to KRX (median): 4.4x 5Yr Avg. Relative Premium to KRX (median): 6.1x Current Relative Premium to KRX (median): 4.7x
Slide 10: Company Performance
Company Performance • 3.4% • • 12.9% • • • • 8.5% 40.2%
Slide 11: Segment Performance
Segment Performance 10Yr Operating Revenue CAGR3: 5.4% 10Yr Operating Revenue CAGR3: 12.0% 3Yr Avg. Operating Margin4: 38.9% 3Yr Avg. Operating Margin4: 42.9% 7Yr Operating Revenue CAGR3: 9.9% 10Yr Operating Revenue CAGR3: 8.0% 3Yr Avg. Operating Margin4: 18.8% 3Yr Avg. Operating Margin4: 31.2%
Slide 12: How Our System Works
How Our System Works Our Community Our Financial Solutions Our System • • Banking Insurance • • • Insurance • Wealth • • • Wealth Benefits • • • Benefits Banking •
Slide 13: Banking
Community FINANCIAL SYSTEM, INC. QQS - Banking COMMUNITY FINANCIAL SYSTEM, INC. | NYSE: CBU BE Community BANK NOVEMBER 2024
Slide 14: CBNA at a Glance
Ranked as one of America’s best CBNA at a Glance banks of 2024 by Forbes • • • • • •
Slide 15: Liquidity & Credit Are Our Foundational Strengths
Liquidity & Credit Are Our Foundational Strengths 2 • • • 2
Slide 16: Loan Portfolios & Asset Quality
Loan Portfolios & Asset Quality
Slide 17: We Have Grown Net Interest Income Every Year Since 2006
We Have Grown Net Interest Income Every Year Since 2006
Slide 18: Our Banking Evolution
Our Banking Evolution ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪
Slide 19: Diversified In-footprint Lender
Diversified $827K average commercial loan In-footprint Lender relationship • • • • •
Slide 20: Commercial Lending
0.07% 10-year average Commercial Lending net-charge off ratio (2014-2023) NOO CRE represents 198% of total bank-level capital compared to the KRX bank-held median of 220%
Slide 21: Multifamily & NOO CRE by Location
Multifamily & NOO CRE by Location
Slide 22: Consumer Lending
Consumer Lending Durable loss history versus industry’ Consumer Real Estate ($3.89 billion) * Broad product set including non-conforming, FHA, VA and ‘$time homebuyers program * 88% consumer mortgage / 12% home equity * 752 average origination FICO score Consumer Installment ($1.97 billion) * 30+ ye
Slide 23: Optimizing Delivery Channels for Growth
• Optimizing • • Delivery Channels for Growth •
Slide 24: Digital Transformation
Digital Transformation • • • • • • • • • • • • • • • • • • • •
Slide 25: Established Growth Capabilities Across All Regions
Established Growth Capabilities Across All Regions
Slide 26: Expansion Markets
Cornwall Expansion of ~s Barrie Peterborough Kings be Montpelier arKkets oe Vaughan Oshawa The Company is investing in the retail network wt through de novo branch expansion in new, more bene densely populated markets throughout the i i hitton current geographic footprint st rochliffer x ° Concord S
Slide 27: Employee Benefit Services
FINANCIAL SYSTEM, INC. Employee Benefit Services BPAS
Slide 28: Employee Benefit Services: BPAS
Employee Benefit Services: BPAS • • • • • • • •
Slide 29: BPAS Business Line Summary
BPAS Business Line Summary • • • • • •
Slide 30: Revenue Model & Performance
Revenue Model & TTM Revenue by Source 51% asset-based Performance 46% fee-based 3% other 10Yr Operating Revenue CAGR1,4: 12.0% 3Yr Avg. Operating Margin3,5: 42.9%
Slide 31: Insurance Services
FINANCIAL SYSTEM, INC. Insurance Services cD) ONEGROUP
Slide 32: Insurance Services
Insurance Services • • • • • • • • • • • •
Slide 33: Favorable Business Mix With Deep Specialties
Favorable Business Mix With Deep Specialties
Slide 34: Revenue Performance
Revenue Performance 7Yr Operating Revenue CAGR1,4: 9.9% 3Yr Avg. Operating Margin3,5: 18.8%
Slide 35: Wealth Management Services
FINANCIAL SYSTEM, INC. Wealth Management Services YS COMMUNITY BANK Wealth Management
Slide 36: Wealth Management Services
Wealth Management Services • • • • • • • • • • •
Slide 37: Trended Results
Revenue by Category $40 8.0% 10-year CAGR $36.6 $345 g539 $336 ry S $35 Trended iS wos ses 9 ws $25 $20.7 aa Results sao 73 507 en $15 The Wealth Management division has experienced a x i I l 365% consistent level of both revenue and asset growth $0 through market appreciation and organic efforts. 2
Slide 38: Wealth Management Services: Financial Performance
Wealth Management Services: Financial Performance 10Yr Operating Revenue CAGR1,4: 8.0% 3Yr Avg. Operating Margin3,5: 31.2%
Slide 39: Financial Performance
Community FINANCIAL SYSTEM, INC. QQS Financial Performance COMMUNITY FINANCIAL SYSTEM, INC. | NYSE: CBU NOVEMBER 2024
Slide 40: Operating Performance Summary
Operating Performance Summary 11.2% growth in operating PPNR per share1 in Q3 2024 compared to Q3 2023
Slide 41: Strong Asset Quality
Strong Asset Quality Historically Strong Asset Quality Metrics Non-Performing Assets (“NPAs”)'? “00% a nl (NPAs/ Assets) 3.00% Period Average® 2008 ] a CBU: 0.37% 1.00% ! f Industry: 1.459 000% Pi ol 0 0 wien on em 2005 2006 2007 2008 2009 2010 20 2012 2013 2014 «2015-2016 2017:«-2018-—« 2019-2020 2
Slide 42: Allowance Industry Comparison
Allowance Industry Comparison
Slide 43: Liquidity Position & Sources
Liquidity Position & Sources • • • • •
Slide 44: Solid Capital Position
So | i d Ca pi ta | os Solid Capital Position . Position = Ready to support growth 16% 14% 12% * Tier 1 leverage ratio maintained well above PCA 10% well-capitalized standards to support future $1.0 organic growth and strategic M&A 8% 6% * Risk-based capital ratios maintained wel-above $0.5 4% KRX p
Slide 45: Outperformance During Turbulence
Outperformance During Turbulence
Slide 46: Shareholder Returns & Key Investment Merits
Shareholder Returns & Key Investment Merits
Slide 47: Valuation Considerations
FINANCIAL SYSTEM, INC. Valuation Considerations COMMUNITY FINANCIAL SYSTEM, INC. | NYSE: CBU NOVEMBER 2024
Slide 48: Valuation Considerations
Valuation Considerations 10Yr Avg. Relative Premium to KRX (median): 4.4x 5Yr Avg. Relative Premium to KRX (median): 6.1x Current Relative Premium to KRX (median): 4.7x
Slide 49: P/E Reference Framework
P/E Reference Framework Employee Benefits (18.2x- 32.1%) Revenue Sta Revenue Quality “Estimates based on the follwing publicly traded consumer nance fms: ALLY, AXP, BEN, COF, DFS, SLM, SYF 2 Estimates based an the folowing publicly traded fms: ADP, BR, HOY, PAY SEIC, SSNC 2 Estimates based onthe fol
Slide 50: Illustrative P/TBV Context
Illustrative P/TBV Context 5Yr 10Yr Avg Avg KRX (median): 1.51x 1.78x KRX (top quartile): 1.72x 2.04x
Slide 51: Appendix
Community FINANCIAL SYSTEM, INC. QQS - Appendix COMMUNITY FINANCIAL SYSTEM, INC. | NYSE: CBU NOVEMBER 2024
Slide 52: Glossary of Terms
Glossary of Terms ACL AFS AOCI AUA AUM. AUMA CAGR CET ciT CNY CRE EBITDA FTE FTEs HRA HSA HTM KRX MRQ £2036) Community Financial System, Inc. | November 2024 Investor Presentation Allowance for credit losses Available for sale Accumulated other comprehensive income Assets under administration Assets
Slide 53: Primary Subsidiaries
Wealth Banking Management 5 A i Services Services Services Insurance Employee Benefit Benefit Plans Community Bank, N.A. Ganramtity Innresiments OneGroup NY, Inc. Administrative Services, Services, Inc. ie , A Benefit Plans La} Aca GUESS Administrative Services, Prima ry uc Nottingham Trust ; ill 7
Slide 54: How We Operate: Our Core Values
How We Operate: Our Core Values
Slide 55: KRX Peer Group
KRX Peer Group er Company Name icker Location Total Assets! er Company Name icker Location Total Assets! pany Flagstar Financial, Inc. FLG Hicksville, NY $114,367 First Interstate BancSystem, Inc. FIBK Billings, MT $29,596 Webster Financial Corporation WBS Stamford, CT $79,454 Glacier Bancorp, Inc.
Slide 56: Reconciliation of GAAP and Non-GAAP
Reconciliation of GAAP and Non-GAAP • • • •
Slide 57: Pre-tax, Pre-provision Components
Pre-tax, Pre-provision Components
Slide 58: Operating Net Income
Operating Net Income Dollars in thousands, except per share data 2024 YTD Net income (GAAP) $169,063 $164,676 $189,694 $188,081 $131,924 $132,688 $43,901 Acquisition expenses, net of tax effect 6,952 3,942 551 3,930 50 159 51 Acquisition-related contingent consideration adjustments, net of tax effec
Slide 59: Net Interest Margin & Operating ROA
Net Interest Margin & Operating ROA
Slide 60: Operating Revenues
Operating Revenues Dollars in thousands ; 2024 5 YTD) 4 Operating noninterest revenues (non-GAAP) Noninterest revenues (GAAP) $35,231 $102,180 $119,020 $123,299 $155,625 $202,423 $224,059 $230,619 $228,419 $246,235 $258,725 $214,834 $220,872 $76,197 Unrealized (gain) loss on equity securities - - -
Slide 61: Equity-to-Assets
Equity-to-Assets Dollars in thousands Total tangible assets (non-GAAP) Total assets (GAAP) $11,410,295 $13,931,094 $15,552,657 $15,835,651 $15,555,753 $16,404,700 Goodwill and other intangible assets, net (836,923) (846,648) (864,335) (902,837) (897,987) (900,623) Deferred taxes on goodwill and othe
Slide 62: Book Value
Book Value Dollars and shares in thousands Book value (GAAP) Total shareholders’ equity (GAAP) $1,855,234 $2,104,107 $2,100,807 $1,551,705 $1,697,937 $1,784,947 Period end common shares outstanding 51,794 53,593 53,878 53,737 53,327 52,546 Book value per share (GAAP) $35.82 $39.26 $38.99 $28.88 $31.
Slide 63: Operating Noninterest Expenses
Operating Noninterest Expenses
Slide 64: Core Results
Dollars in thousands, except per share data Net income (GAAP) $169,063 $164,676 $189,694 $188,081 $131,924 $132,688 $43,901 Acquisition expenses, net of statutory tax effect! 6801 3,897 554 3,966 50 162 52 Acquisition-related contingent consideration adjustments, net of statutory tax effect! - 158 (
Slide 65: Thank you!
Thank you! INVESTOR RELATIONS CONTACT 315.445.7396
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